The fourth Anti-Money Laundering Directive
In December 2014, the European Parliament and the EU Council agreed on a final version of a draft Fourth Anti-Money Laundering Directive (the “Directive”). Consequently, on 20 May 2015 the European Parliament voted for the adoption of the proposed Directive, and its formal implementation will occur upon its publication in the EU Official Journal.
The Need for the Directive
The European Commission has identified a number of reasons for its proposition of adoption of the Directive. Intended as a supplement to the existing anti-money laundering legislative framework and structure, the Directive will aim to (amongst others): strengthen the Internal Market, safeguard the public’s interest from criminal and terrorist activity and ensure economic prosperity.
The Commission has identified the fact that in addition to facilitating trade and economic activity, the existence of the Internal Market has also provided a wide range of opportunities for criminals and terrorist organizations to finance themselves. In order to address the constantly evolving environment and the new challenges posed by money laundering organizations and individuals, the European legislation has to be constantly adapted. In this sense, the Financial Action Task Force undertook an all-encompassing review of the system in place and produced a set of recommendations in 2012. Simultaneously, the Commission itself revised the Third Anti-Money Laundering Directive and identified a range of areas that needed strengthening. The Commission reached the decision that the issues that were being faced could not be dealt with by the individual Member States and a supranational solution was needed. Discrepancies between national rules as to the protection of the financial systems could be exploited by criminals trying to finance their activities. Following an impact assessment, the Commission produced the draft of the Directive for discussion.
Elements of the Directive
There are several areas where the Directive aims to make an impact. First of all, the proposed statute incorporates particular emphasis on a risk-based analysis to be adopted by Member States. In its essence this refers to countries adjusting to the particular set of circumstances applicable to them – the risk in the respective state, the risk in the specific sector, as well as the instances where simplified customer due diligence (CDD) may be utilized (potentially affecting the practices of financial institutions requiring them to refrain from using the simplified CDD as often as they do now). In addition, Member States are required to perform ongoing risk assessments.
Moreover, the Directive foresees the establishment of national registers containing company’s ultimate beneficial owners. The intention of the Commission is for these registers to be available only to the relevant competent authorities, and in exceptional cases to investigative journalists and NGOs if such can prove a legitimate reason for requiring access. Certain Member States have indicated that in order to increase transparency and accountability they are going to make these registers available also to the public. All registers in the Member States are going to be interconnected.
The Directive makes the following changes: (i) decreasing the current threshold of EUR 15,000 that triggers the requirement for carrying out customer due diligence, (ii) increasing the scope of the Directive to apply to providers of “gambling services” instead of only “online casinos”, (iii) incorporating administrative sanctions for entities violating the Directive’s provisions, (iv) better cooperation between national Financial Intelligence Units and (v) enlarging the definition of “criminal activity” under the Directive to include “tax crimes”.
The Directive sets out the minimum requirements that are imposed on Member States, which means that Member States are free to impose stricter requirements and lower thresholds if they choose so. As to its implementation on national level, the Directive must be transposed in national legislations not later than two years from its endorsement by the European Parliament. Publication in the Official EU Journal is expected in June/July 2015.